Aug. 2 (Bloomberg) -- New York City will try to reduce the
recidivism of young male convicts housed on Rikers Island with a
four-year program run by nonprofits and financed by Goldman
Sachs Group Inc.

The bank will invest $9.6 million through a so-called
social-impact bond, meaning it will profit only if the plan
achieves its goals. New York officials said the program is the
first of its kind in the U.S.

“In this new model, private investors fund the
intervention through a nonprofit contractor and the government
pays the contractor only if the program meets its goals,” Mayor
Michael Bloomberg’s office said in a news release.

For Goldman Sachs to earn a profit, the program will need
to reduce recidivism by at least 10 percent. City payments to
MDRC, a nonprofit social-policy group created by the Ford
Foundation that will monitor and run the program, also will be
based on its degree of success. The Vera Institute of Justice
will independently assess the program’s effectiveness, the
mayor’s office said.

Goldman Sachs will fully fund the four-year program, called
the Adolescent Behavioral Learning Experience, through a loan to
New York-based MDRC. Bloomberg Philanthropies, the mayor’s
private charity, will provide $7.2 million to MDRC to back a
portion of Goldman Sachs’s loan. There will be a cost to the
city only if the program succeeds, the mayor’s office said.

New Instrument

“This investment paves the way for a new type of
instrument that enables the public sector to leverage upfront
funding from the private sector,” Lloyd Blankfein, Goldman
Sachs’s chief executive officer, said in a statement.

The program’s targets are inmates age 16 to 18, whose
recidivism rate is now about 50 percent, the mayor’s office
said. Inmates will receive education, training and counseling to
improve personal-responsibility skills, including decision-making and problem-solving, the mayor’s office said.

Two other New York-based nonprofits, the Osborne
Association and Friends of Island Academy, will also deliver
recreational activities “to reduce idleness, promote team
building and afford opportunities for adolescents to practice
what they are learning in a variety of settings and
circumstances,” the mayor’s office said.

The program is part of the Bloomberg administration’s
privately supported $30 million Young Men’s Initiative, which
seeks ways to improve productivity and reduce risk of poverty
for young males.

It’s also part of a national search by Bloomberg’s
foundation to find innovative policies and practices to deal
with difficult urban problems, the mayor’s office said. To
further that effort, the mayor last month offered $9 million in
prizes to U.S. cities through the foundation in a competition
for ideas that local governments can use to solve problems.

“Lessons learned from the nation’s first social-impact
bond will be shared with other jurisdictions who are eager to
test the approach,” the mayor’s news release said.

The mayor is founder and majority owner of Bloomberg News
parent Bloomberg LP.